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How businesses can drive growth in the health and medtech industries

The Asia-Pacific (APAC) region is ageing more rapidly than any in history. And Grant Thornton’s International Business Report (IBR) reveals that business leaders in the region view ageing as the most significant threat to their businesses over the next five years.

  • Contributed by Grant Thornton
  • August 02, 2019
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It will reduce the supply of labour, increase wages and potentially reduce competitiveness. But it isn’t all bad news. Health and medical technology (medtech) businesses are leading the way in identifying rich opportunities in this disruption.

Ageing population tips the balance in APAC

Globally, nearly 2 billion people are expected to be over 60 by 2050 – triple the figure in 2000. 

The OECD predicts that the world’s old age support ratio (the number of people aged 20 to 64 per every person aged over 65) will reduce from 4.2 in 2008 to 2.1 by 2050. 

In the APAC region, things are even more marked. In China, the old age support ratio will plummet from 7.9 to 2.4 by 2050.  

Japan has the oldest population in the world, with 26.3 per cent of its citizens over 65, according to the World Health Organisation (WHO). The OECD predicts this will only get worse, with the country’s old age support ratio falling to 1.2 by 2050. 

In Australia, the proportion of over 65s is expected to peak in 2026, with the cost of care rising through that period and around one in four of the population over 75 by 2025.

Further south, India presents a different demographic challenge. Here, 65 per cent of the population is under 35 but, even so, the OECD predicts India’s old age support ratio will fall from 11.2 to 4.5 by 2050.

What are the risks for the healthcare sector? 

Ageing in APAC is putting pressure on health budgets throughout the region. The tax base to fund healthcare services for the elderly could disappear within 15 years. 

In Singapore, for example, health inflation is running at 9.6 per cent, and health currently counts at 12.6 per cent of its entire spend.

Cost pressures and local country dynamics are forcing a lot of change in the APAC region’s aged care. The Australian economy, for example, is at a crossroads in its aged healthcare provision with less government funding dedicated to traditional care models already at capacity.

The introduction of consumer directed care has transformed home care. Darrell Price, principal and national head of health and aged care at Grant Thornton Australia, explains, “Consumers have more choice of providers, services and pricing models and competition is mounting.”

Meanwhile, as competition has increased, scrutiny of the quality of care has resulted in a royal commission putting the sector under pressure and investigating care quality in residential facilities, retirement living and in-home care. With squeezed margins, a lot of the not-for-profit organisations are struggling.

Another challenge for the region is the supply of skilled workers to service expanding demand in the healthcare sector. 

Shoichiro Mitani, partner at Grant Thornton Japan, says, “In Japan, a shortage of skilled workers has become a serious problem across a range of industries, and is particularly acute in aged care and medical services. Ageing populations and declining birth rates in other countries will also make it extremely difficult for Japan to recruit exceptional international workers.”

Just as businesses across APAC face up to the potential challenges presented by this ageing population, it is clear there are significant opportunities for businesses in the region. 

Far from a gloomy scenario, as APAC ages faster than other global regions, so there is the potential to develop businesses and solutions that can later be exported globally.

Broad opportunities for healthcare investors

Despite the headwinds, the opportunities for lending to the health and aged care industry in the region are broad. Almost half the participants at a recent Grant Thornton Banker’s Boot Camp in Australia nominated the health and aged care sector as having the most robust prospects for future lending growth.

“There is increasing interest from the private equity sector in aged care. In the process of increasing competition and diversification of the market, private equity firms have realised there is money to be made in consolidations,” says Mr Price.

Some investment opportunities are born out of new trends and new business models. As Mr Price explains, in the US, “university hospitals are creating hub and spoke facilities, building little day surgeries and overnight stay surgeries providing basic services, with the main hospitals servicing more complex procedures”.

“This trend is picking up in Australia, with private investors building day hospitals. Meanwhile, Japan is also looking at how they invest in these property developments with a view to bringing in specialists and tenants that can provide the service offering,” he says.

Similar trends can be seen in China. As part of its National Planning Guideline for the Healthcare Service System (2015-2020), the Chinese government is seeking to provide a higher number of community-based senior care and assisted living services. 

As one of the countries facing the most serious ageing crises, Japan has naturally seen changes to traditional residential care models. Conventional retirement accommodation for older adults used to be less like homes and more like medical facilities, says Mr Mitani. 

“Elderly residences with services are now more commonly being promoted. Although care staff are there during the day, attendant services and day care services are provided by external providers and older adults can choose which services they sign-up for, depending on the care they need,” he adds. 

The power of medtech to cut the cost of care

There are huge opportunities for businesses to harness technology in the delivery of health and aged-care services. Medtech is rapidly developing, with doctors providing consultations through distributor technologies in the home via mobile devices.

In Australia, it is largely bigger players that are investing in this technology, with telecoms giant Telstra a major investor in medtech, health services and robotics. 

According to Mr Price, “A patient in one location can be operated on 1,000 kilometres away using robotic operating tools with localised nursing support.” 

Wearable devices and related technology are being used to monitor blood glucose, blood pressure and temperature in real time and provide early indicators of problems.

The Association of Southeast Asian Nations (ASEAN) countries – and Thailand in particular – is a hotspot for this electronic health and medtech boom. 

Ian Pascoe, managing partner of Grant Thornton Thailand, says, “It is a stand-out sector in terms of investment, with huge opportunities between software firms and medical health groups. In countries such as Indonesia, Vietnam and Thailand, proper medical records are sparse.

“There is a desire to change this and introduce electronic records to improve both healthcare and accountability. Some companies, even those unrelated to the medical sector, are seeking to partner with non-governmental organisations to fund the development of e-health records for medical companies.”

Businesses can unlock growth through cross-region collaboration

Medtech isn’t the only area where cross-region co-operation will be key to unlocking growth opportunities. APAC has an extraordinary capability for collaboration and sharing funds, skills and services across the region. This presents diverse opportunities for businesses.

Mr Price explains, “We’re seeing Australian providers look to deliver services across Asia. And institutional investors from elsewhere are looking to invest in the Australian market to learn what we do and how we do it, with the view to exporting these ideas back to other countries.”

He cites the example of Bolton-Clark, a large Australian not-for-profit organisation that is working with provincial Chinese governments to advise on the development and management of aged-care facilities. 

“They've done it very effectively,” says Mr Price. “Bolton-Clark takes a management lead and provides expertise, training, education and some clinical oversight on how services are set up.”

Seize the opportunities as demand continues to grow

With APAC’s ageing population ever increasing, health and medtech businesses are leading the way in providing cutting-edge solutions to the ageing crisis. This challenge is not limited to APAC and the rest of the world is watching. 

How the region approaches caring for the elderly and rebalancing its economies will inform other regions and sectors. The one certainty is that demand will only grow, creating rich opportunities for business disruptors.

Darrell Price, principal and national head of health and aged care, Grant Thornton Australia

Shoichiro Mitani, partner, Grant Thornton Japan

Ian Pascoe, managing partner, Grant Thornton Thailand

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